By Lloyd Sherman, August 17, 2021
In Response to Clark Vernon
Mr. Vernon asks; Can you Trust the Board?
From the perspective of a business consultant and an ex-member of the Board, I am not sure the issue is really one of trust. I believe those who now and have previously given of their time, are genuinely interested in the betterment of Hot Springs Village. However, the point of not trusting words, but trusting actions couldn’t be truer.
So why does this keep happening time and time again? My words have mostly fallen on deaf ears, but I am once again going to address the CULTURE that must change if you want a board who is truly accountable and the property owners have a say in what actually happens.
- The first thing you have to accept is that the Board is NOT REALLY IN CHARGE. Due to Bylaws, combined with the operating philosophy of POA management, the board has been rendered essentially nothing more than a rubber stamp governing body. The Board is provided information from staff. This information is rarely questioned. It certainly can’t be vetted by the board because they have been rendered persona non grata due to: “You are not entitled to interfere with operations.” In addition to this being a management philosophy, it is backed up with Bylaws and operating procedures.
- The second principle you must accept is that staff dictates the direction and narrative.
- The third principle goes along with the second in that you must understand the board can only operate on information provided.
- The fourth principle, whether you accept it or not, is that staff will protect their domain. As Mr. Vernon has pointed out we can certainly go back as far as when Mr. Twiggs arrival and how staff became the driving force on decisions made. It was amplified under Ms. Nalley’s regime. It became painfully evident with the arrival of Mr. King, who within weeks of his arrival became driven by staff and not by the board.
So over the past 8-10 years if you found yourself wondering why board members seemed to take a 180 on what they told you during their campaigning, the reality is that a staff driven environment was in place and any board member that attempted to usurp that philosophy was going to quickly be rendered an enemy and attacked and discredited.
Membership vs Property Owner
Mr. Vernon points out how society goes about changing the narrative with the way it is presented and driven home. He is spot on when he states the intent of the change to Member was an overt effort to reduce property owner input and involvement.
Vernon’s Step Two
While I do believe there should be a process for recalling board members, this is a real slippery slope. You can’t just go around removing people because you don’t think they are doing a good job, when in fact, they don’t realize that it is not them that is driving the train. They may believe they are, but in the current culture which is being allowed, they are not the driver, although they will argue with you or me on that point.
Vernon’s Step Three
While Mr. Vernon’s position has validity, you can perform all the audits you want but if you don’t change the approach to the use of financials along with tighter controls, you will find that THE SYSTEM that wasn’t working before, simply returns. Managers must be taught how to use Profit and Loss Statements, transaction journals, etc, to manage their operations. We can be assured this process hasn’t been followed for at least as far back as 10 years ago. The board could have demanded this, but then you would have to have a GM who could actually train, implement and manage the process.
Vernon’s Step Four
Allowing property owners votes on large expenditures (new items) sounds on the surface to be an excellent idea, knowing it would cost about $45K per vote. However, if voted down, the expenditure would never be made. I can think of several projects that most likely would have failed that have cost us millions. It’s a nightmare for the board, but once again I must remind readers that as long as staff controls the narrative, we are most likely doing nothing more than putting a finger in the dam that must be repaired.
Vernon’s Step Five
The concept of closing golf courses has been discussed previously and I remain unconvinced that this is the answer. Mostly because of reasons already addressed. Like the two-tier, I believe this approach might well result in unintended consequences and result in fewer homeowners and lower collected assessments. You asked what happen due to the two-tier. Well, the unintended consequence was that attention was drawn to all the lots people owned that they were never going to take advantage of. So they quit paying assessments and taxes. Given this month’s financial statements our BAD DEBT now appears it will be $5,000,000 a year. That is an issue that is not sustainable.
As I didn’t see a Step Six I am assuming the last paragraph of Mr. Vernon’s piece addressing management was to be his Step Six. However, his final point is more than well taken. We do and have had a management issue here for an extended period of time. I am not in favor of turning our corporation into a municipality and hiring a municipal type of manager is in my estimation the wrong direction to take. Governments entities at every level (just like the military) operate on Other People’s Money. They focus on how to spend what they are given, not on ways to increase the revenue stream via other methods than putting it on the back of the property owners. That being said, I do believe there is a place in the organization as an Assistant GM in charge of items like sewer, water, etc.
The article penned by Mr. Vernon should not be discounted as so many before have been. He has put a lot of thought and effort into his words and they should be considered along with the input of property owners in general.
Summation
I believe those who have followed my writings know where I stand on the issue of management of our Village. I did come here with the intent of retiring but soon found out that it wasn’t for me. That is why I have offered to become the GM and change the culture that exists. I have not only the background to do this but the desire. I have offered up several suggestions on the front-end that I would implement as GM. One I believe changes the culture almost immediately. That being an environment of salary plus performance incentive pay/bonus. Additionally, I have a proven track record of managing operations through the use of financials that drive performance. I have been willing to put my money where my mouth is and take a substantially lower salary with an upside based on performance. Even if achieved at 100% it would still be less than what I was earning when I retired.
Bottom line is that your boards will most likely continue to disappoint until they have a manager in place who will change the culture and ensure that anything that comes before them is complete and not half-baked as so many have been in the past.
Thank you Mr. Vernon for taking the time and effort to let the Village know your thoughts and not as simply a series of complaints but with a considered opinion on how to correct the issues.
* * *
Thank you for reading. If you like, please comment below. We love to hear your opinion, but comments must be made using your first and last real name, or they will not be accepted. If you would like to submit an article for publication, please contact us through this website. Be sure to bookmark this website. Click here to visit the Hot Springs Village People Facebook Group.
David Sintich
08/17/2021 — 7:01 pm
If by-laws tie our hands why can’t something be done. For instance, before a new GM is hired why can’t a committee of 5 very concerned residents be formed to sit with our BOD, attorneys, POA management and CCI to attempted to bring these laws up to date ? If they are 51 years old or whatever, times have drastically changed an we need a better hand hold on our future without the old laws holding us captive. This is just an idea but we need ideas.
Diana Podawiltz
08/17/2021 — 8:04 pm
Bylaws can easily be changed by a BOD majority vote. As can all of our policies. Many bylaws were changed in favor of the BOD and property owners. What’s written isn’t the issue – it’s the culture. Didn’t anyone notice how badly the BOD handled the garbage truck issue? Didn’t anyone notice how few questions were asked by the BOD of the task force? For pity’s sake, Director Avila didn’t even know the definition of performing lots -something discussed MANY times while she has been a board member.
As to the term “members” vs. property owners. I’m not sure the CEO who started that change but it was really reinforced by the judge’s use of the term in the CCI lawsuit which resulted in giving us property owners access to documents. All be it, system still tightly controlled by the employees.
Anne Shears
08/18/2021 — 8:21 am
It was during L.N.’s tenure that “Property Owners” was changed to “Members” during the earliest stages of CMP implementation. (ACC revisions to Covenants.) One of the last vestiges of that culture will soon be moving on to greener pastures.
Lesley Nalley
08/22/2021 — 5:45 pm
Interesting comments given Article III of the HSV Declaration, circa 1970. https://www.explorethevillage.com/images/members/governing/declaration-1.pdf
Surely no one wishes to repeat the costly lessons of false narratives.
Melvin West
08/17/2021 — 8:31 pm
no comment
Jama Lopez
08/17/2021 — 10:29 pm
Once again, Lloyd, very well said!
Clark Vernon
08/17/2021 — 11:20 pm
By-Laws are entirely BOD driven – a simple majority does it. An easy fix. Lloyd, you are over-rating the staff. If you want a complete history – painstaking though it may be – we can do that. It was BOD with staff making the By-Laws, but BOD only approving. And, millions of $’s in mis-steps in spending approved by the Board coupled with millions of $’s wasted on the loss generating operations of golf and restaurants. And, you missed the point entirely on the need for a Control Audit of our accounting system. Simply put a control audit takes each section of the Villages operations from both a revenue and expense view, and defines each activity that results in an entry in the account system and asks the basic questions: who is authorized to instigate an entry, who is authorized to approve, who detects a deviation, who is authorized to fix it. Then with full transaction records you extract from the system transaction samples in sufficient quantity, then you examine if the accounting policy is being adhered to and itemize deviations. This process includes every step of revenue gathering, and items like purchasing, to see if controls are in place to prevent inappropriate costing, inappropriate contracts ( who tests that they are kick-back free?), that everyone who is being paid, should be paid, and that the amounts are correct). Not so long ago a memo from the controller was presented to the Board reporting basic accounting “issues” that had been straightened out. A scary paper in that the items enumerated as fixed are so basic to good accounting that it is really scary with this organization being down the road over 50 years and in our current accounting system for near 5 (est. I need to ascertain the exact date). In the next several days I will summarize that memo and respond on the items at AmericanaWhen.com. Lloyd, you also missed that I proposed expenditures involving, sewer, water, drainage, roads to be exempt among other things from property owner pre-approval. What we don’t need is another runaway board off chasing rainbows to spend some of this proposed new money – which is what happened the last time around. Staff certainly does not have signing authority on the checkbook for draconian amounts, or are you saying they do?
Lloyd Sherman
08/19/2021 — 8:56 am
Clark,
I am unsure where the disconnect is between what you are saying and your interpretation of what I have said. I totally agree the BOD is the responsible party. I also totally agree that many of our issues could fixed by fixing our Bylaws and policies. The 2020 board was well on their way to trying to fix these issues. Once a new GM was hired, that process was not only thwarted, but was reversed. And like it or not, or even agree with it or not, the loss of the catalysts who were driving that train were systematically driven from the board.
I didn’t miss the point on Control Audits! They would be initially very helpful. However, if you don’t fix the CULTURE issues that exist, the problems we experience today will simply return. I know the value of what you call Control Audits as I used the principle in my consulting practice. We not only analyzed what the issues were, but we wrote the procedures to support the changes, and then unlike most consultants, we actually implemented and monitored the changes to ensure they were operating properly. In almost every consulting engagement I have seen, the problem was not at the rank and file level, but at the very top.
And you are correct that changes need to be done on both the revenue and operations side of the equation. Our organization basically has not marketing or revenue generating DNA, so simply changing the process without having leader who can balance those aspects along with the comp plans to drive the ongoing operations, you will simply return to the same position we find ourselves in today.
I also did not miss your comments on water, sewer, etc. I just don’t happen to believe that type of source should be a GM. Do we need that type of position? YES, and I suggested that type of resource should be reporting to a GM who can balance the revenue and operations side of the business.
I believe what I may have failed to communicate through my writings is that you can change the Bylaws and procedures, you can perform Control Audits, etc. but none of that fixes the overall problems that exist. That being boards who are ill-equipped to do the job they are being asked to do; combined with a GM who knows how to balance both the revenue and operations sides of the business.
Staff does not approve large expenditures above $50K. The board has to approve those. It also makes no sense to me to put all large expenditures before the property owners for votes. We have way too many diverse opinions to make that work, plus the cost would be significant. What I am in favor of is the opportunity for property owners to have venues where they can be truly heard. That needs to be done at the GM level and not the board level, which is why I have proposed monthly Town Halls with the GM and their immediate reports. That way they can present what is being worked on and get input from the property owners before it goes to the board for approval. We need to slow down the process on approval of large expenditures and stop this we need to do this today philosophy.
I believe you and I are basically on the same page, but it is difficult, if not impossible, to fully understand and reach conclusions via the written word. There simply has to be more interaction and communication with property owners.
It might be helpful to review what I had previously presented regarding our CULTURE and suggestions to fix it:
CULTURE SHIFT – PART 1 – https://hotspringsvillagepeople.com/culture-shift-hot-springs-village-part-1/
CULTURE SHIFT – PART 2 – https://hotspringsvillagepeople.com/culture-shift-hot-springs-village-part-2/
Gene Garner
08/18/2021 — 3:12 pm
Even though “staff” had an input on outsourcing our trash pickup, it was done by a vote of the BOD. Being an outsider (I’m just a property owner) I don’t have all the facts, but as a casual observer I believe the situation presents a number of problems.
For instance will the one arm trash truck have to make two runs on each street since it only picks up from the right side? Or will we have to push our trash carts across the street?
One of the main reasons for the trash contract was the lack of personnel to man the rear loaders, how can the contractor hire people to operate their trucks but the POA can’t?
What’s plan B if there are unseen problems (and I’m sure there will be)?
I’d like a better explanation of the cost comparison of buying another rear loader and the new contract- but who am I to ask how my money is being spent?
Also the $43k cost to hear what the property owners think doesn’t fly. There are inexpensive, off the shelf software programs that allow unlimited polls to hear what we want.
I’m sure “staff” gives their opinions–that’s their job, but the final authority and responsibility rests with the BOD. As a manager I would never blame my employees for my mistakes or for that matter any mistake.—Gene
Lloyd Sherman
08/19/2021 — 8:20 am
It is a fact that the board remains responsible for the decisions that are made. However, I believe you are underestimating the influence staff has on the board. That BTW is the symptom, not the overall problem. My comments here are not meant to be negative towards the institution of the board, but rather to point out that most board members are not equipped to know what questions to ask to vet projects. That can be seen time-and-time again through the implementation of approved projects. Why didn’t someone on the board raise the questions you do? After all, our only requirement to be a board member is you have to be a member is good standing. So, the real problem is that we elect way too many property owners who are not equipped to know what questions they should be asking. The most recent examples are the trash truck issue which will, like most other projects, not result in cost savings and will in fact be more expensive. Then add the acquisition of 2,115 lots approved by the board BEFORE the implementation plan was introduced and is currently being worked on. This should have been done BEFORE we purchased the properties.
I have written on the subject of fixing the board issue. What I have suggested is that we fix the requirements to be a board members with qualifications. I also believe we would get a better mix of those qualified to analyze and question proposed expenditures by paying our board members a stipend.
As long as we continue to focus on the symptoms’ and not the real problems, you can only expect what history has given us.
David Alan Dost
08/18/2021 — 7:03 pm
In regards to the trash truck issue: Great decision to go with the new style of trucks. Many times when a municipality contracts out the garbage services the contractor fails. Poor performance or substandard service. Here, we are reducing the labor needed. Efficiency will increase and we save money.
Trust, we bestowed our trust on the elected BOD members. Will they make choices that we may not agree with and only time will tell if it was a correct decision, absolutely. What I don’t trust is someone who is elected and then quits and then wants to run the show.
Lloyd Sherman
08/19/2021 — 1:43 pm
Mr. Dost,
I don’t know you and you don’t know me, but I totally agree with you that the basis is TRUST. So it occurs to me that if you knew what I know, would it change the way you look at who can be trusted. For instance, how would you react if the board as a body blindsided their sitting Chair and pretty much left them with no option but to resign? And riddle me this; how would you handle the issue of trust if you had provided a confidential and privledged document to the voting board members of the board and then that document was shared with the person who was being addressed in that communication? Suppose you gave that body an opportunity to reveal and remove the person who shared this document? So now where is the trust issue?
So you are absolutely correct about trust and I have on more than one occasion offered to share the details of what I know. However, it is not appropriate to share those on this type of a public forum. Maybe it is easier to sit behind a screen and be critical without all of the information, but when you take pot shots at people without having the full details, I also call that a trust issue. You are more than welcome to reach out to me for my side of the story, but like most, I don’t expect you will.
David Dost
08/20/2021 — 4:32 pm
I didn’t appreciate our first encounter when you were running for the board and I have no confidence in your abilities to lead. Sounds like when the heat was turned up you bailed and now you want to run the show. You by trade (realtor) belong to one of the least respected professions in the country. Yes, I know a few realtors that I would trust but I do not trust your abilities. If the issue is so germane to your actions then there is no reason why you didn’t disclose it. I read something when I was twelve and it has stuck with me: “Honesty is like pregnancy….either you is or you ain’t”